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Measuring true sales and underreporting with matched firm-level survey and tax-office data

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  • Zhou, Fujin
  • Oostendorp, Remco

Abstract

This paper uses firm-level survey data matched with official tax records to estimate the unobserved true sales of formal firms in Mongolia. Taking into account firm-level incentives to comply with taxes and a production function technology linking unobserved true sales with observable firm-level production characteristics, the authors derive a multiple-indicators, multiple-causes model predicting unobserved true sales. Comparing predicted true sales with sales reported to the tax office, the analysis finds that 38.6 percent of firm-level sales are underreported. It also finds evidence that firm-level survey data suffer from significant underreporting. Finally, the paper compares this approach with two alternative approaches to measuring underreporting by firms.

Suggested Citation

  • Zhou, Fujin & Oostendorp, Remco, 2011. "Measuring true sales and underreporting with matched firm-level survey and tax-office data," Policy Research Working Paper Series 5628, The World Bank.
    • Handle: RePEc:wbk:wbrwps:5628
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    Cited by:

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    2. Badaoui, Eliane & Walsh, Frank, 2022. "Productivity, non-compliance and the minimum wage," Journal of Development Economics, Elsevier, vol. 155(C).
    3. Roberto Dell’Anno, 2023. "Measuring the unobservable: estimating informal economy by a structural equation modeling approach," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 30(1), pages 247-277, February.

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    More about this item

    Keywords

    Taxation&Subsidies; Microfinance; Emerging Markets; Economic Theory&Research; Debt Markets;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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